Non resident selling home in Ontario - help help help - Canadian-US-Global Income tax help - david ingram expert US CANADA cross


My_question_is: Both

question: Dave,
When I filed exit tax return in 2003 and moved to USA, now I realized that T1161 form was not submitted.
I own a house I Ontario and I want to sell it now and there will be no capital gain housing prices went down since.
When I will sell my house what implication will there be, Tax or penalty (because of not filing T1161). 

I would appreciate your advice.



david ingram replies:

You will need to file Form T2091 and forms T2062 and T2062A within ten days of the actual  sale.  If you miss the ten days, the penalty is  $25.00 a day  for each owner with a minimum of $100 and to a maximum of $2,500 each.

You will need to get an appraisal of what the property was worth the day you left.  Get this from the realtor who is selling the house.  i.e. when he gives you his or her comparable market analysis for today, have the realtor do one for May 1, 2003 or whatever other day you left the country. 

I think you will be surprised at the values however. There should be a taxable profit unless you are in a destitute mining town.

In 2003, the Average price of a home in the GTA (Greater Toronto area) was $293,067 
In October 2009, the average in the GTA is just below $400,000.  and the average in the Toronto 416 area code is about $464,000

In July 2009, the average in the GTA was $395,414 and the Toronto 416 code was $421,110.

In July 2008, the average in the GTA  was $355,401 and the Toronto 416 code was $395.343

You can expect to pay some tax to Canada.

Whatever you do, do NOT file a late T1161.  That will guarantee you a penalty of about $4,000 each with interest and to date, I have not seen (knock on wood) the CRA instigate a late filing penalty for the T1161 upon a person in your position.

Remember who and where we are when you need that paperwork done.  Although it may seem silly to send the work to us here in Vancouver, it will be correct and we do enough of them that we are not learning on your dime.

We can also blend them in with the US returns at the same time.

Remember that even if the property was sold at the same value, it  WILL  generate a taxable US profit because of the difference in exchange rates

The 2003 exchange rate was 1.40146175 and .71354070

You have made 25% on its value in the exchange rate .

If it was worth $200,000 Left, it is now worth at least $250,000 US when sold,.


This older email will help as well

My question is: Applicable to both US and Canada

QUESTION: My friend is selling one of her properties here in Canada. It is elected as her PPR and she will be exempt from any capital gains tax. However, she also currently resides in the US as is worried about any tax implications this sale may have.
Are her worries unwarranted? She is a Canadian and British citizen with landed immigrant status in the US. Thanks.
david ingram replies:

Your friend can NOT have a tax free Principal residence in Canada if she is a resident of the United States unless she has continued to file a Canadian return as a resident and reported her world income to Canada each year.

If she did that, and does not own and live in another home in the US, she may claim it as a tax free principal resident provided it has not been rented while she has been gone.

If she has become a US tax resident (automatic if she has a green card), then the house can be tax free (up to $250,000 US profit since she entered the US) IF she has occupied it as her residence for a full 24 months out of the last 60.

Obviously, you should not make any decisions based upon this email.

If she has moved to the US and has rentals in Canada, she should have filled out forms NR-6 with a Canadian tax agent for the rentals and that agent should be filing an NR4 by march 31st each year to report the rent collected in her name. Just as the HSBC or B of M, or Scotiabank would deduct 10% tax on any interest paid to a non-resident and send the non-resident an NR4 slip rather than a T-5 slip to report the interest.

When your friend left Canada, (assuming she has not been filing Canadian returns as a resident), she should have filed Canadian form T1135 to report the value of her assets when leaving.  This would include her personal residence, mutual funds, stock accounts, and any other real estate holdings.

If any perceived profits are calculated because of the deemed sale and reacquisition of capital assets when leaving Canada (Departure Tax), she should have filed forms 1243 and 1244 to defer the tax.

The taxation in the US is determined by paragraphs Article XIII(6) and (7)

6. Where an individual (other than a citizen of the United States) who was a resident of Canada became a resident of the United States, in determining his liability to United States taxation in respect of any gain from the alienation of a principal residence in Canada owned by him at the time he ceased to be a resident of Canada, the adjusted basis of such property shall be no less than its fair market value at that time.

7.  Where at any time an individual is treated for the purposes of taxation by a Contracting State as having alienated a property and is taxed in that State by reason thereof and the domestic law of the other Contracting State at such time defers (but does not forgive) taxation, that individual may elect in his annual return of income for the year of such alienation to be liable to tax in the other Contracting State in that year as if he had, immediately before that time, sold and repurchased such property for an amount equal to its fair market value at that time.

Paragraph 6 deals with the principal residence which was tax free up to the date of departure.

Paragraph 7 refers to the taxable profits calculated and deferred on forms 1243 and 1244 and allows other properties to have their cost price adjusted for US tax purposes to the values on the date of emigration/immigration.
So, if she is treating herself as a resident of the US and has another house in the US, she will be taxable in Canada and the US on any profit or gain in value from the date she moved to the US.

If she is still taxing herself as a resident of Canada and does not own and live in a home in the US and lived in the Canadian house for 24 out of the 60 months before sale, the house is tax free in both countries.

If she is taxing herself as a resident of Canada and has a home in the US, she has to decide which house she is going to claim as her tax free residence for Canadian tax purposes because she can only have one.  If she elects to claim the Canadian house tax free, then she will owe CANADIAN tax on the US house even if she bought it after moving to the US.

Your friend needs to talk to someone who knows what to ask and what to do and we do provide that service.   You can see charging details in the following pricing guidelines.

David Ingram wrote:

If your question was not answered fully or you wish to go further, I am available for individual consultations by phone or email or in person for $450 per professional hour. 

Please also note that we prepare Canadian, US, Australian, UK and New Zealand returns on a mail in, email, fax, snail mail or couriered basis. At any time, our clients are in 40 countries or more.  They have every occupation from nuclear Submarine captains to FedEx pilots to Major Bank officers to Politicians, Diplomats and border patrol officers.  My favourite, however, is a penguin catcher in Antarctica among others there..

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